To start a nonprofit in Texas, you file a Certificate of Formation (Form 202) with the Texas Secretary of State for a $25 fee, adopt internal bylaws, obtain an Employer Identification Number from the IRS, and then apply separately for federal 501(c)(3) recognition and Texas state tax exemptions. The IRS charges $275 or $600 for the exemption application depending on which version you qualify to file. State law requires at least three directors, and specific language must appear in your formation documents for the organization to qualify as tax-exempt.
Pick a Name and a Registered Agent
Your nonprofit’s name has to be distinguishable from every other entity already on file with the Texas Secretary of State. Under the Texas Business Organizations Code, it cannot be the same as or deceptively similar to any existing filing entity, foreign entity registered in Texas, or reserved name. The name also cannot imply a purpose different from what your formation documents describe or suggest a government connection. Search the SOSDirect database before you file. If another entity holds the name you want, that entity can give notarized written consent for you to use it.1State of Texas. Texas Business Organizations Code Section 5.053 – Distinguishable Names Required
Every Texas nonprofit must also designate a registered agent to accept legal documents and official mail. The agent needs a physical street address in Texas, and the nonprofit itself cannot serve as its own agent.2Office of the Texas Secretary of State. Registered Agents FAQs An officer, director, or employee can fill the role, or you can hire a commercial service, which typically runs $100 to $250 per year. Whoever you choose has to consent to the appointment and be reliably available at that address during business hours.
File the Certificate of Formation (Form 202)
Form 202 is the document that legally creates your nonprofit corporation. You can download it from the Secretary of State’s website or complete it through the SOSDirect online portal.3Office of the Texas Secretary of State. Form 202 – Instructions for Certificate of Formation Nonprofit Corporation The filing fee is $25. Online filings usually process within a few business days; paper filings by mail take longer, and you should send two copies with an exact-amount check.
Directors and Officers
Texas requires at least three directors, and one person cannot hold both the president and secretary positions.4Office of the Secretary of State. The Texas Business Organizations Code – A Guide for Texas Nonprofit Corporations Form 202 asks for the name and address of each initial director. Beyond that, the organization must appoint at least a president and a secretary; vice president, treasurer, and other positions are optional.5State of Texas. Texas Business Organizations Code Section 22.231 – Officers Aside from the president-secretary restriction, one person can hold multiple officer titles.
Purpose Statement and Dissolution Clause
Your purpose statement describes the organization’s charitable, educational, religious, or other exempt function. To satisfy both state law and the IRS, the language should limit activities to those permitted under Section 501(c)(3). Vague or overly broad wording can delay your federal exemption application.
You also need a dissolution clause directing that, if the nonprofit ever closes, any remaining assets will go to another 501(c)(3) organization or a government entity. The IRS publishes suggested language and will not approve an exemption application without this provision.6Internal Revenue Service. Suggested Language for Corporations and Associations per Publication 557 Including it now avoids an amendment later.
Most nonprofits choose perpetual duration. The form also collects your registered agent information and the incorporators’ signatures. Once approved, the Secretary of State returns a file-stamped copy of the certificate. Keep it; you will need it to open bank accounts, apply for tax-exempt status, and sign contracts.
Adopt Bylaws and a Conflict of Interest Policy
Bylaws are your nonprofit’s internal operating rules. They are not filed with the state, but they govern day-to-day decisions and settle disputes among directors. At a minimum, bylaws should cover how often the board meets, what constitutes a quorum, and who can call special meetings. Texas law requires at least three days’ notice for the initial organizational meeting of the board; for regular and special meetings, the statute defers to your bylaws, so set the notice periods explicitly.7State of Texas. Texas Business Organizations Code Chapter 22 – Nonprofit Corporations The bylaws should also lay out how officers are elected and removed, their duties and term lengths, and the process (including vote thresholds) for amending the bylaws themselves.
Alongside the bylaws, adopt a conflict of interest policy. It should require directors and officers to disclose situations where they could personally benefit from a transaction and to recuse themselves from the related vote. The IRS asks about this policy on the 501(c)(3) application, and having one shows the organization puts its public mission ahead of private gain.
Get an Employer Identification Number
Before applying for tax-exempt status, get an Employer Identification Number from the IRS. This nine-digit number functions like a Social Security number for the organization and is required to open bank accounts, file returns, and hire employees. Apply using Form SS-4 online for an immediate response, or by mail or fax.8Internal Revenue Service. Instructions for Form SS-4 There is no fee.
Apply for Federal 501(c)(3) Status
Forming the corporation does not by itself make you tax-exempt. You have to apply separately to the IRS under Section 501(c)(3). Which application you file depends on the organization’s size.
Form 1023-EZ
Smaller organizations can use the streamlined Form 1023-EZ if they meet every eligibility requirement on the IRS worksheet. The two main thresholds: annual gross receipts have not exceeded $50,000 in any of the past three years and are not projected to exceed $50,000 in any of the next three years, and total assets do not exceed $250,000 in fair market value.9Internal Revenue Service. Instructions for Form 1023-EZ The user fee is $275, and the form is submitted through Pay.gov.10Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee Processing typically takes a few weeks, and the form relies on attestations rather than detailed financial submissions.
Form 1023
Organizations that do not qualify for the EZ version must file the full Form 1023. It requires a detailed description of past, present, and planned activities and three years of financial data (actual figures, or good-faith projections if you have been operating less than a year). The IRS also asks about compensation paid to officers, directors, and any employee or contractor earning more than $100,000.11Internal Revenue Service. Instructions for Form 1023 The user fee is $600, and you must include copies of your articles of incorporation and bylaws.10Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee Processing can take several months, especially if the IRS asks follow-up questions.
When the IRS approves the application, it issues a determination letter confirming your status as a public charity or private foundation. That letter is the document donors will ask to see, and it is the primary proof that contributions to your organization are tax-deductible.
Apply for Texas State Tax Exemptions
Federal exemption does not automatically extend to Texas state taxes. Apply separately with the Texas Comptroller of Public Accounts using Form AP-204 for exemption from the state franchise tax and sales tax.12Texas Comptroller of Public Accounts. Application for Exemption – Federal and Certain State Tax Exemptions Include a copy of your IRS determination letter or the sections of your formation documents that establish an exempt purpose under the Texas Tax Code. Organizations with a specifically educational or religious mission can use Form AP-205 instead. Once granted, sales tax exemption lets the organization buy items for its own use without paying state sales tax.
Qualifying religious, charitable, and educational nonprofits also get an exemption from the state portion of hotel occupancy tax for employees and representatives traveling on official business, though local hotel taxes still apply.13Texas Comptroller of Public Accounts. Hotel Occupancy Tax Exemptions
Stay in Good Standing
Getting the nonprofit formed and exempt is the start. Keeping that status requires regular filings.
Most tax-exempt organizations file an annual information return with the IRS. Which form depends on size: Form 990-N (the e-Postcard) for organizations with gross receipts normally $50,000 or less, Form 990-EZ for organizations with receipts under $200,000 and assets under $500,000, and the full Form 990 above those thresholds.14Internal Revenue Service. Instructions for Form 990 Return of Organization Exempt From Income Tax Do not skip this filing, even in a year with no income. If the organization fails to file for three consecutive years, the IRS automatically revokes its tax-exempt status under Section 6033(j).15Internal Revenue Service. Automatic Revocation of Exemption for Non-Filing Reinstatement means filing a new exemption application and paying the user fee again.
On the state side, the Texas Secretary of State may require your nonprofit to file a periodic report (Form 802) up to once every four years. The filing fee is $5. If you fail to file within 30 days of receiving the notice, the organization can lose the right to conduct business in Texas, and late fees accrue at $1 per month up to $25.16Office of the Texas Secretary of State. Form 802 – Instructions for Periodic Report – Nonprofit Corporation Even with a franchise tax exemption, you still file an annual franchise tax report with the Comptroller each May 15, usually as a no-tax-due report.17Texas Comptroller of Public Accounts. Franchise Tax
One boundary worth knowing: Texas does not require most charities to register with the state before soliciting donations.18Office of the Texas Attorney General. Registration and Filings Exceptions apply to certain law enforcement, public safety, and veterans organizations that solicit by telephone. If you plan to fundraise in other states, though, check each state separately, because most do require charitable solicitation registration.